Freshworks Turns Profitable, Posts $237 Million Revenue in Q2 CY26, Raises Full-Year Guidance
Nasdaq-listed SaaS firm Freshworks reported a 16% year-on-year revenue increase to $237.4 million in the second quarter ended June 2026, while achieving its first quarterly GAAP profitability of the year, marking a meaningful financial milestone months ahead of the company's own end-of-2026 target.
Here's the profitability story in numbers. Freshworks posted a GAAP net profit of $3.2 million in Q2, compared to a net loss of $1.7 million in the same quarter last year, and swung to profit sequentially from a $4.8 million loss in Q1 CY26. Operating income stood at $6.1 million against an operating loss of $8.7 million a year earlier, while non-GAAP operating income grew to $55.9 million, translating into a 23.6% operating margin, up from 21.9% in the year-ago quarter. This also marks the company's eighth consecutive quarter achieving the Rule of 40, a widely watched SaaS benchmark that measures growth plus profitability combined.
CEO Dennis Woodside credited AI adoption as central to this turnaround, noting the company's Freddy AI Copilot is now attached to over 71% of new deals, with the Employee Experience segment's annual recurring revenue growing 24% on a constant currency basis to $567 million, now representing 59% of total ARR. Customers with more than $100,000 in ARR grew 26% to 1,746 accounts, accounting for 40% of total ARR, and net dollar retention stood at 104%.
The cost side tells a story of discipline alongside growth. Sales and marketing costs rose nearly 12% to $106.5 million, and R&D expenses increased to $43.8 million, while general and administrative expenses actually declined to $37.9 million from $47 million, even as the company absorbed $7 million in restructuring charges tied to a May 2026 plan that is now substantially complete.
Buoyed by this performance, Freshworks raised its full-year CY26 revenue guidance to a range of $963.5 million to $966.5 million, up from its earlier forecast, and increased its non-GAAP operating income guidance to $222-228 million, signalling management's confidence that this profitability, not just growth, is now sustainable going forward.
From years of chasing scale to finally proving the business model works, Freshworks' Q2 numbers are the clearest signal yet that AI-led SaaS companies can grow and turn profitable at the same time.
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— Sandeep Raiza